The present day economies of the world which are functioning beyond the international boundaries are relying to a very great extent on the mechanism of the negotiable instruments such as cheques and bank drafts and also the oriental bill of exchange prevalent in India, known as ‘hundis’. Since cheque plays an important role in business transaction, dishonour of cheque threatens the credibility in transacting business through cheque. One of the biggest problems, which we are facing in the smooth functioning of the cheque system, is Dishonour of cheques, which threatens the credibility of this negotiable instrument.

The problem is becoming bigger with the passage of time. It is hindering smooth business transactions. The great hardship is caused to a person if a cheque issued in his favor is dishonoured due to insufficiency of funds in the account of the drawer of the cheque.

To bring end to such practices, the dishonour of certain cheques has been made an offence by an amendment of the Negotiable Instruments Act, 1881 by the Banking Public Financial Institutions and Negotiable Instrument Laws (Amendment) Act, 1988.Earlier the act of dishonour of cheque was treated as an offence under Indian Penal Code. Other remedy was to file a suit for recovery which was civil in nature. Now after amendment criminal remedy of penalty was inserted in Negotiable Instruments Act, 1881 to ensure credibility of holders.

In this case following questions were raised (1) Whether the complainant in a complaint case for the offence punishable under Section 138 of Negotiable Instruments Act is a victim as defined under Section 2(wa) of Cr.P.C. as amended by the Act No.5 of 2009 with effect from 31.12.2009 (2) If the complainant is a victim within the definition of Section 2(wa) of Cr.P.C., is he entitled to file an appeal invoking the proviso to Section 372 of Cr.P.C. before the Court to which an appeal lies against the conviction (3) If not, whether the complainant in a complaint case for the offence punishable under Section 138 of Negotiable Instruments Act or for any other offence either bailable or non- bailable is required to file an appeal against acquittal in a complaint case seeking special leave of the Court under Section 378 (4) of Cr.P.C. All these questions were answered in negation and thus it was categorically held by the court that such an appeal would not come within the purview and ambit of the amended provisions of Section 372 of the Code and the remedy provided to the person aggrieved by an acquittal in a cheque-bounce case under Section 138 of the Act of 1881 was only before the High Court in terms of Section 378(4)of the Code, upon seeking leave.

The facts presented before trial court by complainant that accused has requested the complainant to advance loan of Rs.10,00,000/- to meet his transport business. The complainant advanced hand loan of Rs.10,00,000/- to the accused and for discharge of legally recoverable debt, the respondent herein had issued the cheque for a sum of Rs.10,00,000/- drawn on State Bank of Mysuru ,Main Bazar Branch, Ballari, in favour of the complainant. When the said cheque was presented for encashment it was dishonoured with an endorsement "payment stopped by the drawer". After dishonour of the cheque, complainant got issued legal notice calling upon the accused to pay the cheque amount and inspite of service of said notice, accused failed to make the payment there under within the stipulated time. Hence, the complainant filed the private complaint before the trial Court for the alleged offence under Section 138 of N.I.Act. The complainant issued the notice by RPAD, which was returned back on, but the notice sent under certificate of posting was served on the respondent-accused and also submitted that accused sent the reply notice. As accused failed to pay the amount in stipulated time cause of action arose against them. By later acquittal order of accused was passed in Trial court but some major points were not taken into consideration.

Further appeal in Karnataka High Court, learned counsel for appellant submitted that notice was sent but was not served on respondent-accused and the endorsement on the said cover "Door lock EzÉ so returned sender" was mentioned. This aspect was not properly appreciated by the trial Court. The parties ought to have examined the postal authorities before the trial Court to clarify the controversy between the parties, which was not done in the case. Thus on basis of above mentioned observations it was considered necessary by Court to remand the matter to the trial Court to consider the matter afresh and to dispose of the same in accordance with law giving opportunity to both the sides to lead their further evidence. Hence, appeal was allowed and the judgment and order of acquittal dated passed by Trial court was set-aside.

It is a case where the complainant was presented a cheque but was returned back for reason of insufficient amount of balance, then notice was served but accused failed to pay the amount within time. The appellant once again presented the cheque to bank and was returned for same reason, another notice was served. The trial court held that there could not be more than one cause of action in respect of a single cheque, the complaint was not maintainable. By accepting the contention of the respondent and acquitted him. Further in appeal to Hon’ble High Court a question was raised whether the payee or holder (hereinafter referred to as 'payee' for the sake of brevity) of a cheque can initiate prosecution for an offence under Section 138 of the Act for its dishonour for the second time, if he had not initiated such prosecution on the earlier cause of action. The above question came up for consideration before different High Courts in several cases and different views were laid down. But in present case not only considering bare text of sections, interpretation of Section 138 along with Section 142 was done and concluded that the period of one month for filing the complaint will be reckoned from the day immediately following the day on which the period of fifteen days from the date of the receipt of the notice by the drawer, expires. Thus no cause of action can arose twice and appeal was dismissed.

In this case plaintiff issued three cheques to defendant with regard to transaction held between them. All three cheques were dishonoured where set for encashment. A notice was served by opposite party but payment by plaintiff was not done so complaint regarding the same was lodged. But despite of fault plaintiff was acquitted on basis of some evidence provided in Trial Court. Further appeal was put forth before Appellate Court and reversed the finding and decisions of the Trial Court, found the Petitioner guilty of the offence under Section 138 of the N. I. Act. Later Revisional Application was filed by accused in Trial Court it was held that an appeal, against an order of acquittal passed by the Magistrate in a case under Section 138 of the N. I. Act, lies only in the High Court, if special leave for such appeal is granted by the High Court, under Section 378 (4) Cr. P. C. and as such Sessions Court has no jurisdiction to entertain such appeal and hence order of conviction was set aside and was acquitted.

The facts of case runs as the accused borrowed `60,000/- and executed a demand promissory note as security. Later, the cheque was issued towards the repayment, on its presentation, was dishonoured by the Bank with an endorsement 'funds insufficient'. Demand notice was issued and there was failure to pay the cheque amount. Hence, a private complaint was filed and cognizance was taken for the offence punishable under S.138 of the Act. Statement of the accused under S.313 CrPC was recorded. He filed written statement but did not lead defence evidence. With reference to the rival contentions and the record of the case, the said Judgment of acquittal was passed. Further on appeal one point drew the attention of court that appellant was also engaged in business of money lending and he obtains blank pronotes and blank cheques for security purpose, he also had pronote of accused. The same pronote was misused by appellant for advancement of amount as security as no promissory note was produced. Thus it was held, the conclusion of the Trial Judge is not faulty, since the same has been arrived at on proper appreciation of the evidence on record and appeal was dismissed.

This article does not claim to be all exhaustive one on the subject. If this article raise ones desire to know more, the main purpose can be considered as fulfilled. Bounced cheques are one of the most common offences plaguing the financing world. According to the Supreme Court, there are over 40 lakhs such pending cases in the country. Although, there have been a few amendments in the Act which has made the Act, a self contained statute, wherein provisions have been made to check the delays and to ensure speedy justice with more deterrent punishment, yet the problem of cheque bouncing is not decreasing.

Though insertion of the penal provisions have helped to curtail the issue of cheque lightheartedly or in a playful manner or with a dishonest intention and the trading community now feels more secured in receiving the payment through cheques.

This post is written by Renu Kathale from RTMNU’s Babasaheb Ambedkar College of Nagpur (2020).

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